The underlying dispute involves a business deal gone awry between two midwestern car dealerships. The relationship began when Steven Lindquist and Craig Miller of Lindquist Ford, Inc., a successful Ford dealer- *fn1 ship in Iowa, offered to assist Middleton, a struggling Ford dealership near Madison, Wisconsin. The parties generally agreed that Miller, Lindquist's general manager, would provide management services to Middleton with compensation to begin after he turned Middleton profitable and also that Lindquist would provide a capital infusion in exchange for an ownership interest in Middleton. Negotiations continued after Miller started working at Middleton, but the parties never reached a more specific agreement. The relationship broke down 11 months after Miller assumed general-management responsibility at Middleton, largely because Lindquist failed to come forward with the expected cash infusion. Middleton showed Miller the door. Still not earning a profit, Middleton did not pay Lindquist for Miller's services.

Lindquist sued Middleton to recover compensation for Miller's services. After a bench trial on unjust-enrich-ment and quantum-meruit claims for relief, the district court entered judgment for Lindquist on both claims. Middleton appealed, and in Lindquist I we held that the court had misconstrued the elements of quantum meruit under Wisconsin law, taken too narrow a view of the equitable component of unjust enrichment, and failed to consider important evidence as part of the equitable balancing required for both causes of action. We remanded for retrial. The court again entered judgment for Lindquist for nearly identical damages. Middleton appealed a second time.

We reverse. The court's factual findings were clearly erroneous. The court found that Middleton became profitable during Miller's tenure and that Middleton fired Miller before he had a fair opportunity to restore the dealership to profitability. Both propositions cannot be true. Apart from this internal inconsistency, the court's findings are insufficiently supported by the evidence. The court's damages determinations were also flawed for the reasons identified in Lindquist I.

I. Background

The facts are described in detail in Lindquist I; we repeat only those necessary to the resolution of this appeal. In 2002 Lindquist and Middleton opened negotiations about how to revive Middleton's financially troubled Ford dealership. Middleton was co-owned by brothers Dave, Robert, and Dan Hudson, and they had explored relationships with other dealerships, including the Geiger Group in Elkhorn, Wisconsin. Geiger had the potential to invest money in Middleton but did not have general-management capabilities of the sort that Lindquist offered.

Negotiations became more serious in 2003. Perhaps sensing that it might take months to iron out the terms of their relationship, in March 2003 Lindquist and Middleton signed a confidentiality agreement that also contained a proviso that neither dealership would be liable to the other in the absence of an executed written agreement. On April 17, 2003, Steven Lindquist, Craig Miller, and Lindquist's accountant Carl Woodward met with Dave Hudson, Robert Hudson, and Middleton's accountant Joe Schwarz to explore an arrangement whereby Miller would provide management services to Middleton in exchange for a percentage of Middleton's net profit. The Hudson brothers emphasized early in the meeting that their dealership also needed a cash infusion, but the parties did not reach agreement on this point. They did decide, however, that Miller would immediately begin working as a general manager at Middleton and Woodward would draft a proposed management agreement. Miller took over general management of Middleton on April 21 and began implementing a long list of budget cuts. He also identified goals for each department, began weekly management meetings, and terminated several employees. Miller continued as general manager of Lindquist while also working at Middleton.

On June 2 Lindquist faxed a first draft of a proposed agreement to the Hudson brothers. The draft agreement provided that the "only compensation" for Miller's management services would be "the Fee, the use of one vehicle, and the reimbursement of travel, meals, and lodging costs," with the proposed "Fee" defined as 45% of Middleton's net profit. Under this proposal, payment of the Fee would commence on the first day of the first month that the dealership showed a net profit. Lindquist also proposed a termination provision stating that if Middleton terminated Miller's services before January 1, 2005, Middleton would pay Lindquist the greater of $350,000 or 50% of Middleton's profits after payment of a 15% management fee and the 45% Fee. The proposal emphasized that Miller would have full authority in running Middleton's day-to-day operations. No mention was made of a capital investment.

Schwarz responded on July 1 in an email containing two attached memos (oddly dated July 2) reiterating Middleton's position that Lindquist needed to provide cash. Schwarz explained that without a capital investment,

if . . . the changes made by [Miller] do not work, it has weakened [Middleton's] position further and [Lindquist will] have put nothing at risk. Our original understanding of a cash insertion, which is at risk, gives [Middleton] greater comfort that [Miller] is at the top of his game and is giving the priority effort we need.

In a conference call later that month, Lindquist agreed to make the cash infusion in exchange for an ownership interest in the form of stock. Schwarz agreed to draft a letter of understanding to this effect.

On August 28 Schwarz circulated a letter of understanding "for the relationship among the parties to be legally formalized at a later point." The letter provided that the parties "have agreed to enter into an agree-ment whereby [Lindquist] would provide a cash infusion into [Middleton] and take over management of the operations for the fees discussed below." As Lindquist and Middleton had understood all along, "the fees" were to be based solely on a percentage of Middleton's profits. They included 15% of Middleton's "real income" for recoupment of time and expenses associated with the assistance provided and 22.667% of the remaining "real income" as compensation for management of Middleton's operations, with payment to begin the first month that Middleton reported a real-income profit. The letter defined "real income" by reference to Generally Accepted Accounting Principles ("GAAP") income adjusted for last-in, first-out accounting ("LIFO") and other items. The proposed capital investment from Lindquist was set at $500,000, in return for a 25% ownership interest in Middleton. The termination provision proposed in the letter of understanding differed from the one in Lindquist's June 2 proposal; it called for a termination payment based exclusively on a percentage of Middleton's net profit and omitted the January 1, 2005 date. More specifically, the termination language in the letter of understanding proposed that if Middleton terminated the parties' relationship for good cause, Lindquist would be entitled to 50% of profits for the succeeding 24 months if profits were between $500,000 to $1,000,000, and for 36 months if profits exceeded $1,000,000.

Although negotiations continued over the next several months, the parties never did reach a final written agreement. In September 2003 Miller began working a half day each week as president of yet another Ford dealer- ship in Clinton, Iowa. Dave Hudson testified that he grew increasingly frustrated in late 2003 and early 2004 as the capital investment from Lindquist never came. On March 24, 2004, with the dealership still sustaining losses, Dave Hudson met with Miller and terminated the parties' relationship. He testified that this decision was based primarily on Lindquist's failure to ...

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